President and CEO Per Samuelsson comments on Q4 and full-year 2019
BEIJER GROUP's Westermo business entity continued its convincing progress in the fourth quarter, setting new records for order intake, sales and earnings in the full year 2019. In this context, I’d like to highlight the successes of the long-term goal-oriented strategic initiative that Westermo commenced in 2015. Over a three-year period, this has resulted in average yearly organic growth of 18%, and boosted EBIT by 43% per year.
Westermo became the Group’s largest business entity in the fourth quarter, representing some 45% of the Group’s sales and 65% of our business entities’ aggregate EBIT for the full year. Our acquisition of Virtual Access of Ireland in the fourth quarter put another piece of our long-term strategic plan into place.
Virtual Access, alongside the acquisition of Neratec earlier in the year, injects annualized sales of 180-190 MSEK. These acquisitions and initiatives in the power distribution and rail infrastructure segments, coupled with new product launches with superior performance mean that Westermo has paved the way for continued profitable growth.
The Beijer Electronics business entity’s agreement to provide display solutions for US elevator manufacturer Otis was another keynote event in the quarter. This deal covers deliveries worth over a five-year period, starting spring 2020. Our partnerships with global corporations demonstrate our international competitiveness, and that we can satisfy their demanding standards.
For the Group as a whole, our operating results in the fourth quarter were mixed. The Group’s order intake was in line with previous quarters of the year, but lower than the strong numbers of the corresponding period of 2018, while sales and EBIT are continuing to increase. We were also able to report healthy free cash flow of over 70 MSEK in the quarter.
In approximate terms, Beijer Electronics is following its long-term plan, and was able to report increased sales and better earnings for the full year 2019. Its transition to the new X2 series and old product phase-outs have caused fluctuations between quarters, which impacted order intake, sales and earnings, so quarterly results were not at a satisfactory level. This pattern will sustain for another few quarters, but earnings will stabilize as the share of X2 products increases.
In 2020, we expect the business entity to generate a sales surplus from its new platform for the Internet of Things acirro+ which we launched in the fourth quarter. In addition, our shipments to Otis will commence in the spring. So overall, Beijer Electronics has good potential to continue its positive progress.
Korenix is in an intensive phase developing a new platform with software and hardware based on a modular design. All products should will be upgraded to this new platform in 2020 and 2021.
But meanwhile, we noted that this business entity did not achieve the sales volumes necessary to achieve profitability in 2019, partly due to some of our customers wanting shipments deferred till after year-end. As previously announced, an expanded and intensified partnership with the Beijer Electronics business entity has been initiated. This setup expands Beijer Electronics’ offering to the market, so both business entities can sell more, due to greater coordination. Simultaneously, Korenix gets access to Beijer Electronics’ stronger marketing organization, especially in Europe. We’re also working on coordination gains between these entities in segments such as manufacturing and supply chains, with the aim of reducing the Group’s cost base.
BEIJER GROUP delivers products to customers whose businesses include elements of project sales, which means that order intake can vary between quarters. The long-term trend is important. Since we set our strategic direction in 2016, BEIJER GROUP has grown organically by 11% per year, turning
an operating loss to an EBIT of over 100 MSEK in 2019.
The strategy of initiatives on extensive product regeneration, more focus on a customer-oriented marketing and sales organization, plus rationalization of manufacturing and logistics—to name a few measures—have all been clear successes. But things can, and should be, even better. As Westermo’s excellent progress and the opportunities we are presented with demonstrate. We’re also continuing our extensive product development initiatives, focusing on regenerating and expanding product ranges across the Group’s three business entities, with the aim of supporting continued profitable growth.
The current phase of the business cycle is presenting a mixed picture, with forecasts pointing in somewhat differing directions. We’ve seen some projects being delayed, while our pipeline of attractive projects is also filling up. Individual markets are still fairly stable without any wide fluctuations.
We’ve moved into the new year with a good order book. In 2019, we launched a number of new products, executed two strategic acquisitions and signed a major supply agreement with Otis. BEIJER GROUP thinks that overall, the Group can increase sales and earnings in the full year 2020.
President and CEO